NEW YORK, May 19 (Reuters) – The U.S. dollar fell on Tuesday as a rise in equity markets worldwide and growing optimism that the global recession is moderating eroded its safe-haven appeal.
Data showing improving business sentiment in Germany and news that several major U.S. banks are asking to repay emergency funds they received from the government bolstered confidence in the global economy and the banking system.
Improved risk appetite also lifted sterling above $1.55 to its highest this year and pushed the Australian dollar to a seven-month high versus the greenback.
“I think the key driver right now for the FX market is the outlook for global growth,” said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto.
“What we’ve seen in the last 24 hours are some indications that have given reason for the market to expect a little bit better global growth outlook than they had at the end of last week.”
The greenback tends to fall when risk appetite rises as investors move money out of safe-haven dollar-denominated assets into riskier investments. Hopes that the global economy has turned a corner have stung the dollar in recent sessions.
In late New York trading, the ICE Futures’ dollar index, a measure of the dollar’s value against six major currencies, fell 0.6 percent to 82.087 .DXY. The index has lost more than 5 percent since it hit a roughly one-month high in April.
The euro traded at $1.3633 <EUR=>, up 0.6 percent on the day, although it was off the day’s highs at $1.3668, according to Reuters data.
German data showed investors and analysts grew much more optimistic in May that economic conditions will be better late this year, with the monthly ZEW poll on economic sentiment hitting its highest since June 2006. For more see [ID:nLJ942330].
Technical analysts now expect the euro to test last week’s high around $1.3721; a breach could pave the way for a move toward $1.40.
